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Economic Report: U.S. consumer credit grows in August at the smallest rate in seven months

The numbers: U.S. consumer credit increased $14.4 billion in August, down from a $17.3 billion increase in the prior month, the Federal Reserve said Thursday. That translates into an increase at at 4% rate, the slowest pace since January.

Economists has been expecting a $17 billion gain, according to the Wall Street Journal forecast. Credit growth hit $38.2 billion in June.

Big picture: A slowdown in auto sales is a factor in the moderation, economists said. Ian Shepherdson, chief economist at Pantheon Macroeconomics, said consumers are borrowing more this year than prior to the pandemic because of the government stimulus payments they’ve received. The funds provided households enough cash to make down payments on major purchases, and given some consumers confidence they can make monthly payments.

Key details: Revolving credit, like credit cards, rose at a 4% rate in August after a 7% increase  in the prior month. This is down from a 22% jump in July. 

Non-revolving credit, typically auto and student loans, rose at a 4.1% rate for the second straight month. This category of credit is ordinarily much less volatile but has moderated, after five months of growth readings above 6% rate earlier this year, due to the weak auto sales.

The data does not include mortgage loans, which is the largest category of household debt.

Market reaction: U.S. stocks
DJIA,
+0.98%

SPX,
+0.83%

were broadly higher Thursday as the Senate reached a near-term compromise on raising the debt ceiling.

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